On 30 August 2018 the Australian Competition and Consumer Commission (ACCC) cleared Sydney Transport Partners’ proposed acquisition of the majority interest in the WestConnex project following the offer and acceptance of court-enforceable undertakings. The WestConnex Project comprises three significant toll road concessions in the Sydney region. Sydney Transport Partners is a consortium led by Transurban Limited, which already owns or has a majority interest in seven out of the nine existing toll roads in Sydney.
The ACCC raised two main concerns in relation to the proposed acquisition:
- First, the ACCC was concerned that the proposed acquisition may substantially lessen competition for concessions to construct, own and/or operate toll roads in NSW. As an incumbent toll road operator Transurban is considered to have certain advantages when bidding for new toll road concessions, including access to detailed traffic data on which to base traffic forecasts and an ability to leverage existing toll road assets to make unsolicited proposals to the NSW State Government. The ACCC considered that if the WestConnex concessions were awarded to an alternative bidder, there would be another major toll road operator in Sydney that would be capable of competing strongly with Transurban for future toll road concessions; and
- Second, the ACCC was concerned that the proposed acquisition may substantially lessen competition in one or more markets for the supply of road services to motorists. For motorists travelling between some points of origin and destination in Sydney, the WestConnex will likely represent a substitute for another existing Transurban-owned toll road. The ACCC was concerned that if the WestConnex concessions were awarded to an alternative bidder, competition for motorists may lead to lower tolls and higher service levels for motorists.
CRA assisted Transurban in responding to the ACCC’s concerns. In particular, CRA set out an appropriate framework for defining the bounds of the markets for the supply of toll road services to motorists and demonstrated that, due to the inelastic nature of demand at capped toll levels, the acquisition of WestConnex by an alternative bidder was unlikely to result in a reduction in tolls or significant improvements in service quality compared to an acquisition by Transurban. The ACCC accepted this argument, noting that only a small number of road users in Sydney would be likely to switch between current Transurban toll roads and the WestConnex toll roads. CRA also advised Transurban on whether its access to detailed traffic data or ability to leverage toll road assets would be likely to lessen competition for future toll road concessions. In order to obtain informal clearance, Transurban undertook to publish the traffic data that Transurban uses when bidding for new concessions, which will assist all bidders to compete for new concessions.
For more details, please see the ACCC’s media release here.